Gold and commodities have soared. Economists are worried about the Federal Reserve’s creation of excess money. Since we are in the middle of the Christmas season, I want to forward my views on deflation and inflation at “street level.” This post will never earn me a guest lecturer invitation at Wharton or Harvard, but it is a look at what is really happening at street level. Let’s call it the Single Malts I Like Every day (“SMILE”) Index.
A Trip to the Malt Shop
Visiting my favorite beverage shop in New York is always a revelatory experience. Perhaps because of the large sales volume, New York retailers can extract large discounts from their distributors. Some examples:
- Lagavulin 16-year old – $47.99 (nationally $89.99, highest price $107)
- Talisker 25-year old – $89.99 (nationally $267.23, highest price $420)
- Oban 18-year old Limited Edition – $79.99 (nationally $139.99, highest price $154.35)
The New York Lagavulin wars are particularly instructive:
- Nine months ago, my favorite store priced Lagavulin at $56.99.
- A competitor priced Lagavulin at $54.99.
- My store matched the price.
- Later my store dropped the price to $49.99: and
- On my most recent trip my store dropped the price to $47.99.
- In researching this post, I found a New York –based on line site selling Lagavulin for $45.46 (NY delivery only).
Talisker, Lagavulin and Oban are Diageo (“DEO“) products, a major scotch producer (Johnny Walker, J&B, Classic Malts, etc). Despite a weak dollar, Diageo is having difficulty selling premium whiskies and is heavily discounting. Remember that these scotches target a “luxury market” consumer supposedly impervious to the current recession. Apparently that is not the case.
Street Level Deflation
I also noticed diminished foot traffic walking around mid-town New York in the midst of the Christmas shopping season. Lord and Taylor at 3 PM on the afternoon of the 17th of December looked empty. Broadway shows at the TKTS booth were available at half price for almost all Broadway shows. High end restaurants now regularly have specially priced prix-fixe menus for both lunch and dinner.
Even coffee is affected by deflation. Dunkin’ Donuts originally priced its premium coffee at $10 per pound. It has run a perpetual sale in its shops selling two pounds of coffee for $12.99. There are few retailers who can maintain premium pricing, and many are resorting to deep discounts.
Finally, I strolled the 47th Street jewelry district. I like to call this glittery block between Fifth and Sixth Avenues the “Street of Dreams.” Again, there was little foot traffic, the stores were empty and sales people looked bored.
Inflation or Deflation?
My gut instinct is that deflation is prevailing. We have a consumer economy predicated on purchases of luxury, non essential goods. Plasma televisions, laptops and single malt scotch whiskies are hardly the necessities of life. OK, strike that, maybe Lagavulin is a necessity. Food shopping at my local Shop Rite store, I noticed a pile of 42 inch plasma televisions on sale for $329. At the same time the store was marking down a famous French premium cheese from almost $10 to $2.99. Certain staples may temporarily rise in price, but it looks like consumers have “pulled in their belts” and will only buy even premium goods at heavily discounted prices. That spells DEFLATION. I guess just take advantage of the discounts and SMILE.
loading...
Related posts:
Tags: deflation, Diageo, inflation, Lagavulin, Oban, single malt scotch, SMILE Index, Talisker
